Oakland port, AMB negotiate facility
Oakland's Port Commission authorized staff at its July 21 board meeting to enter into an exclusive six-month negotiating process with AMB Property Corp. and a local developer for a long-term lease to operate an intermodal rail terminal on a 168-acre parcel that is part of the former Oakland Army Base.
AMB has offered to redevelop and operate the dedicated rail facility under a 66-year master lease concession. The project will include extensive environmental remediation before construction can begin.
AMB, headquartered in San Francisco, is a global owner, operator and developer of industrial real estate catering to the logistics and freight transportation sectors. It is paired with Oakland-based commercial property developer California Capital Group, which has a 15 percent stake in the joint venture.
The Oakland City Council also approved the development team to develop a $572 million logistics, office and transportation park adjacent to the rail hub on former Oakland Army Base property now owned by the city. The vote opens a one-year negotiating period to finalize a deal.
The port commission is scheduled to decide on moving forward with the deal in February if the port and AMB reach agreement. An option agreement would govern the development process for three years during which time the port would still be the landlord and AMB would prepare environmental reviews, permits and designs for the property. A final master lease agreement could be finalized in 2013, at which point AMB would take over development and management of the property.
Other bidders for the brownfield intermodal site were CenterPoint Properties, the Chicago-based logistics investment arm of the California Public Employees' Retirement System; and Ports America, the largest domestic stevedore and marine terminal operator with operations in 95 U.S. facilities, plus two inland intermodal terminals in Chile and Mexico.
The Ports America terminal concession is located across the street from the proposed rail facility. The port's goal is for a high-velocity marine terminal to primarily attract national cargo moving inland to the Midwest by rail in order to help improve air quality and reduce local truck traffic. Port officials are in discussions with BNSF Railway and the Union Pacific to serve the intermodal facility.
The AMB joint venture barely edged out CenterPoint based on scoring of financial, technical and operational factors, according to details provided in the agenda for a port subcommittee meeting. Ports America came in a distant third.
The decision does not shut out Ports America from participating in the intermodal project. AMB-CCG, according to its proposal, will take the lead in developing the logistics facilities and Ports America will design and operate the rail facility. The two parties will therefore coordinate the development of the outer harbor berths, on-dock rail and the logistics facilities, which will include transload, cross-dock, bulk warehouse storage, truck terminals and outside storage areas.
'The greatest effect will be increased efficiencies, significant savings in the cost of cargo movement as well as substantial environmental advantages that reduce both energy consumption and carbon emissions,' the proposal said.
In fact, Ports America's primary purpose for submitting a bid for the Army base property was to ensure that its needs for seamless integration of the marine and intermodal terminals were kept in mind by the city and port authority during the selection process, said Peter Stone, the company's chief commercial officer. Ports America exchanged ideas with AMB and CenterPoint throughout the bid process and would have outsourced development of the land and logistics facilities to either real estate company if it had become the master developer, he explained.
'We've been talking with AMB. We know their team very well and their business model really complements our investment,' he said.
AMB's experience developing logistics facilities near ports around the world and its ready base of customers will help speed up the overall development. The rail portion could be up and running within three years of a final deal, depending on how much environmental remediation is necessary, he added. Under the best case scenario, the ship-rail transfer facility could be in operation sometime in 2016.
AMB-CCG said developer involvement in both the city and port projects will enable smoother negotiations on aspects such as shared infrastructure, environmental remediation and entitlements, enabling all parties to generate revenues sooner.